Who Will Last Longer: Trump or Iran’s Theocrats?

Traders in Tehran’s Grand Bazaar held a protest strike in June against the collapse of the rial on the foreign exchange market, as demonstrators also took to the streets.

Photograph by Atta Kenare / AFP / Getty

During a golfing holiday at his New Jersey resort, President Trump on Monday signed an executive order to re-impose economic sanctions on Iran. It is the second of three steps designed to force the Islamic Republic to either negotiate a new agreement to curtail its nuclear program—and halt a host of other activities—or face economic isolation. The first step was the President’s decision, in May, to abandon the historic 2015 nuclear deal negotiated by the Obama Administration and five other major powers. This second step, this week, enforces punitive measures on Iran as well as foreign companies that do business with it on everything from automobiles and airplanes to pistachios and gold. It also cuts off Tehran’s ability to use the U.S. dollar, the primary currency of the international financial system, for any transaction. The final step—to be imposed on November 4th, the anniversary of the U.S. Embassy takeover in Tehran—will sanction all Iranian oil exports to any country and any importer. It is designed to get Iran’s contribution to the global energy market down to zero.

Taken together, the three steps end a brief respite in tensions between Washington and Tehran that date back to the 1979 revolution. “Our policy is based on a clear-eyed assessment of the Iranian dictatorship, its sponsorship of terrorism, and its continuing aggression in the Middle East and all around the world,” Trump said, in a statement released by the White House on Monday. He called on all nations to make clear that Iran “faces a choice: either change its threatening, destabilizing behavior and reintegrate with the global economy, or continue down a path of economic isolation.”

The question now is which country can hold out longer.

Trump is defying the other five signatories to the 2015 accord—Britain, China, France, Germany, and Russia—which are still committed to the nuclear deal. He’s also ignoring U.N. Resolution 2231, which the Security Council endorsed unanimously. In a joint statement, the foreign ministers of Britain, France, Germany, and the European Union said on Monday that they “deeply regret” Trump’s move to snap back sanctions. The deal, they wrote, is “crucial for the security of Europe, the region, and the entire world.” More than two years after it was implemented, they continued, it is “delivering on its goal, namely to ensure that the Iranian programme remains exclusively peaceful,” as the toughest inspections ever imposed on a country have confirmed in eleven reports. Levelling new sanctions imperils Iran’s incentive to coöperate.

Thumbing their nose at Trump, the Europeans said that they “are determined to protect” companies that have engaged in legitimate business with Iran since the deal took effect. All five of the other signatories, including China and Russia, have committed to maintaining financial channels to Iran and insuring that Iran can still export its oil and gas. “Preserving the nuclear deal with Iran is a matter of respecting international agreements and a matter of international security,” the Europeans said. They pledged to intensify their efforts in the coming weeks. In June, China vowed to continue buying Iranian oil; it is the largest importer of Iranian petroleum products, this year accounting for about a quarter of Tehran’s exports.

“Nothing will happen,” the Iranian Foreign Minister boasted to a group of local journalists on Monday. “I believe we will manage to pass this critical juncture as well, as we did in the past.”

The economic impact is already being felt in Iran, however. “As soon as the Administration announced an exit from the nuclear deal, companies around the world began scaling back or terminating their involvement in the Iran market,” Kenneth Katzman, an Iran expert at the Congressional Research Service, told me. “This is particularly true for European firms that have a great deal of exposure to the large U.S. market. The impact of all sanctions’ re-imposition by November will be significant, but not as crippling as the sanctions were in 2012-2015, when all countries around the world were coöperating with U.S. sanctions.” The Iranian economy may flatline or even face a slight recession, Katzman said. But he added that it “will be able to muddle through indefinitely.”

The lack of unified foreign support for the sanctions will mean lots of loopholes, more complicated enforcement, and many more arguments between the U.S. and European governments than in the past, sapping the diplomatic strength needed to engage China, India, or others that do business with Iran, Richard Nephew, the author of “The Art of Sanctions” and the lead sanctions expert during the nuclear negotiations with Iran under the Obama Administration, told me. The tougher enforcement challenge will be when oil exports are sanctioned in November. Large energy companies that withdraw from Iran are likely to be replaced by smaller operations that “will be able to potentially operate with impunity in Iran, muting sanctions’ impact long term,” Nephew said.

At the same time, Iran’s theocrats have been under growing pressure, too. Since December, sporadic demonstrations in nearly all of the country’s thirty-one provinces have protested unemployment; rising prices; the plummeting value of the country’s currency, the rial; delayed wages; and other economic hardships. The rial has lost more than half of its value since April, generating crisis runs on foreign currency and gold. The demonstrations have occasionally turned political, with videos on social media showing some protesters chanting for the ouster of President Hassan Rouhani.

The protests reflect growing internal opposition to the regime, economic deprivation, and political repression, John Bolton, the national-security adviser, said on Fox News, on Monday. “This regime is on very shaky ground. The real question is whether the Revolutionary Guards Corps and the ayatollahs will use force against their own people.” Bolton said that the United States is intent on putting “unprecedented pressure” on the Islamic Republic, although he claimed that the goal is not regime change—despite his repeated calls for the theocracy’s ouster as recently as January, before he joined the Administration.

Trump has offered Iran another out, kind of. In a surprise move, given his blustery threats and hostile language, the President last week suggested a willingness to meet with Iran’s President to negotiate a new nuclear accord. The gesture was similar to Trump’s overture to the North Korean leader, Kim Jong Un, whom he met for a summit in Singapore, in June. “He was very serious about it,” Bolton said. “If the ayatollahs want to get out from under the squeeze, they should come and sit down. The pressure will not relent while the negotiations go on, much as in the case of the maximum-pressure campaign against North Korea.”

In a televised appearance on Monday night, Rouhani said that he, too, was ready to talk—although Iran also had new subjects it would add to the terms, including compensation for U.S. actions against Iran since the C.I.A.-backed coup in 1953. “If somebody puts a knife in his opponent or enemy’s arm and says we want to negotiate, the answer is that they must first pull out the knife and then come to the negotiation table,” Rouhani said. “Negotiation at the same time with sanctions is meaningless, and these sanctions are targeting Iranian children and people.”

The one venue where the two leaders could meet is the U.N. General Assembly, which opens next month, in New York. Both Trump and Rouhani are expected to speak. President Obama had a brief telephone conversation with Rouhani when he was in New York in 2013. It launched two years of nuclear diplomacy, culminating in the nuclear deal. But the leaders of the two nations have not met since the 1979 revolution.

As the two nations face off over the next three months, the broader question is not how much sanctions will hurt Iran but, rather, the strategic context in which they are being applied, Daniel Glaser, a former Assistant Treasury Secretary for Terrorist Financing and Financial Crimes, told me. “Sanctions are a tool. They are not a policy. Despite U.S. protestations to the contrary, U.S. goals remain unclear, and the strategy by which it intends to achieve those goals remains unclear.” Punitive economic pressure on Iran will bite, Glaser said. But sanctions are always more effective when they are carried out by many nations. “It is here that the increasing isolation of the U.S. from its traditional allies can become more damaging,” he said.

There is no clear goal to the Trump Administration’s sanctions “other than Iran capitulating and coming back to the table to renegotiate,” Matthew Levitt, a former Deputy Assistant Secretary for Intelligence and Analysis at the Treasury, told me. “And that seems unlikely.”